Filing identity and reporting period
The supplied filing is SA Recovery Corp.’s Form 10-K for the fiscal year ended February 29, 2012, filed June 11, 2012. This does not match the request metadata identifying Nixxy, Inc. and “2011 Q4”; the summary below reflects the filing text provided.
Business context
SA Recovery was a development-stage company pursuing a mobile unit to remove contaminants from sand. The unit remained unfinished, and the company reported no revenue since inception. The prototype had problems including leaks under pressure, complexity, and valves clogging with sand. Management said the company had minimal assets and operations and considered it a shell company.
Financial results and position
| Metric | Year ended Feb. 29, 2012 | Prior year |
|---|---|---|
| Revenue | $0 | $0 |
| Net loss | $24,930 | $41,967 |
| Operating cash flow | $(17,501) | $(24,157) |
| Cash at year-end | $737 | $2,238 |
- At February 29, 2012, total assets were $737, all cash; current liabilities were $143,683, leaving a $142,946 working-capital deficit. Shareholders’ deficit was also $142,946.
- Current liabilities included $2,679 accounts payable, $15,000 accrued director salary, $49,375 related-party notes, and $76,629 convertible notes and interest payable in default.
- The convertible note originated as $65,000, bears 5% interest, and has a conversion feature for 2 million shares at $0.0325 per share. It matured in 2009, was extended to February 29, 2012, and was in default when the filing was made.
- There are no meaningful revenue or profit margins to report. The company had cumulative losses of $214,507 from inception through February 29, 2012.
Changes versus prior year
The net loss narrowed by $17,037, while operating cash use improved by $6,656. Cash declined by $1,501 during fiscal 2012, compared with a $68 increase in the prior year. Related-party notes rose from $33,375 to $49,375, and the total current-liability balance increased from $124,204 to $143,683.
Outlook, risks and unusual matters
- For the next 12 months, management proposed seeking approximately $160,000 to address the unit’s technical problems, pursuing other business activities, or merging with an operating company. No financing arrangements or definitive agreements were reported.
- The company depended on advances from an affiliate and said it might need further shareholder advances, outside financing, or private securities sales. The filing cautions that funding may not be available on acceptable terms.
- The independent auditor issued an unmodified opinion but highlighted substantial doubt about the company’s ability to continue as a going concern. The financial statements contain no adjustments for a possible failure to continue.
- The company had no full-time employees apart from its sole officer, no independent directors or audit committee financial expert, and reported ineffective disclosure controls and a material weakness in internal control over financial reporting.
- The auditor’s report describes the company as having no current source of income or cash, while the balance sheet reports $737 cash at year-end. The cash flow statement reports $16,000 of related-party note proceeds, while the notes describe $18,700 in cash advances plus $3,525 of expenses paid by an affiliate; these disclosures do not reconcile clearly.
- The prior license agreement expired in 2010 and was not renewed. The company said future development of the mobile unit would not require royalties under that agreement; fabricating the original prototype for sale would require a new license.
Important facts for investors to verify
- Confirm the issuer and period: the supplied filing is for SA Recovery Corp., not Nixxy, Inc., and covers the year ended February 29, 2012.
- Reconcile related-party advances and the discrepancy between the auditor’s “no cash” wording and reported year-end cash of $737.
- Verify the status, amount, default terms, and potential conversion of the $65,000 convertible note, as well as the related-party debt and any accrued director compensation.
- Assess whether the company obtained funding, resumed product development, completed a merger, or otherwise addressed the going-concern uncertainty after the filing date.
- Check share terms and market liquidity: the cover reports par value of $0.0001, while the balance sheet reports $0.001; the filing also states that the last stock sale occurred in October 2010.